ETH at the merge, Social decentralization and more - The Daily Gwei Refuel #413 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daddy gray refuel where you kept the latest news in ethereum ecosystem I'm your host and ninja Sonic has the 25th of July 2022. alright everyone let's get into it so a bit of a slow weekend this past weekend actually haven't got that much to get through which is surprising I thought that I missed things but yeah it just didn't seem to be a very kind of eventful weekend but that does mean that I have kind of like a chance to talk about a few things I've wanted to talk about for a little while here and one of those things is just the general kind of I guess like markets and I guess the ball case for ether you've heard me give like a lot of times before but I feel like it's worth reiterating uh at times like

this I haven't really talked about it for a little while especially when it comes to kind of the like the merge I know the price action has been kind of meh recently obviously we've bumped off the lows went to I think what 1600 and something and now we're hovering around 1500 or something and I got no idea you know if we're going to go into another bull market anytime soon or anything like that I don't think so like for me the way I kind of like look at things is that after kind of like dumping that hard and finding you know potentially finding a bottom it kind of like just likes to go sideways for a little while but the thing is is that like I talk to my friends about this all the time in in crypto I'm just kind of like I was like

I get the thesis of like it going sideways for a while I get the thesis of it potentially continuing to be bearish because the macro environment is so poor still but then I look at this upcoming huge Catalyst for ethereum in the merch and I kind of like look at that I'm like I can't I just can't see like or be bearish at this point in time and I put out this tweet when I was talking to my friends about this just to kind of quantify this and this is this is something that that hell press talk about on Bank list but essentially my tweet says you know newly issued ethering the market today is 13 500 13 500 eighth which is uh 22 million dollars uh newly uh well 22 million dollars at about 1600 uh dollar eighth and then I said newly issued either

hitting the market for six to 12 months after the merge is zero because as you guys know withdrawal was unable until 6 to 12 months after the merge so no new Supply that's being issued is going to come to Market because it can't be withdrawn and none of the kind of like rewards that were paid to validators up until this point from December 1st 2020 can be withdrawn either and then I continued by saying what do you think happens to the price of eighth when we remove up to 13 500 eighth of Daily Miner cell pressure now people obviously replied to this and kind of like uh I guess put a more nuanced view on this and I want to speak to a few of those points obviously miners do not Market dump 13 500 eighth each and every single day right like it just doesn't happen

like that what they typically would do is they'd probably go through an OTC desk or they'd sell slowly over time but the point is is that most of that eighth will enter circulation will be sold because that's forced to be sold miners have fixed costs or in that they have to pay their electricity they have to pay their maintenance they have to pay their personnel have to pay all those ongoing kind of like costs right there's no way around that even if they want to Stack e they still have to pay their costs just like you've got bills to pay so do that like maybe you look at your paycheck okay I'm getting paid this much this week I want to put this much into eth and then you can't because you literally don't have the money left over after paying your bills it's the same for

these miners but the thing with miners is that they're getting paid in if like that is their revenue stream and to uh kind of like realize that eighth in dollars dollars they have to sell it so they sell it and they sell a lot of it now obviously post merge we're still going to be having issuance that's going to be going to validators but we're dropping this by about 80 to 90 and I think at current I mean I I'm kind of like going off like rough napkin math here but at current kind of um apy validators are being paid I think 1500 to 2000 each kind of like per per day um at current kind of like current uh staked ether Mount uh and that will obviously be variable depending on the amount of each state now that's the first thing and the second thing is that

stakers don't have those ongoing costs like miners right like yeah they'll probably have to sell for kind of like taxes and things like that but they don't have to sell I mean maybe a little bit for electricity but not really because they're probably just using marginally more than they would otherwise use um but they don't have those massive electricity costs they don't have to kind of like keep re-upgrading their Hardware every few months or every maybe six or 12 months something like that they don't have kind of like storage costs like to do an industrial sized staking kind of like uh setup you can do it from your home computer like that's that's hilarious to me that that is the case because to do that with mining you need a whole warehouse and that is obviously not cheap right so there's all those costs to kind of like Get

collapsed with that but not only that right it's also the fact that it's going to be zero for six to 12 months so if you look at the way the market dynamics work right it's all based on supply and demand obviously I've spoken about it before and I've said Supply is just one factor if the demand isn't there then price is going to go down even if the supply is zero but the thing is eth has a lot of natural Demand right it obviously has demand to pay fees has demand people that want to stake wanna use it this collateral want to use it in his investment vehicle so East demand side is fine line even at this point in time where we're considered like a bear Market or a sideways Market if we stayed like this right if we stayed and had the same amount of demand post merge the

price has nowhere to go but up because we just removed you know 20 million dollars of daily cell pressure essentially right so if the demand stays the same and we remove 20 million dollars which is a lot of daily cell pressure then the price has nowhere to go but up and this is what hell press said right in his bankless interview and I just want to kind of reiterate that point uh and one thing on that as well people often point out oh but you know each daily training volume is like 15 billion dollars or something like that you guys like I think you need like maybe maybe maybe you know this but a lot of people who don't understand this trading volume and what moves the market is very very different so for example most of the trading volume that you see and that kind of like coin Gecko and

coin market cap show I got it's got to do with Arbitrage right Arbitrage transactions between different exchanges add to that trading volume and that's kind of like it's not net neutral but the people doing the Arbitrage are not trying to kind of like buy it for like a long-term investment and they're not new money it's just the same money flowing around doing arbs right and there's a there's a big debate about all of this I kind of like where that money ends up but a lot of the volume is arbitrage right secondly there's a lot of scalpers where a lot of day Traders out there that's not new money that's just the same kind of money sloshing around maybe they made money and some other Trader lost money it's the same net kind of like effect from that right um and then I kind of like uh uh there's

a lot of volume that comes from miners selling right through OTC desk things like that there's a lot of uh kind of like volume that comes from spoofing a lot of the time too and this has actually been an issue for a while because exchangers will love to spoof their volume in order to make it look like they're doing better than they are so trading volume is not a good indicator of how much money is actually required to move the price of it like obviously we don't need 15 billion dollars a day of buy pressure to keep the price of ether what it is now like that's just insane when you when you really kind of like thinking through it doesn't make any sense right so it's always at the margin so the new money coming in and buying eth right right or the existing money that's kind of like

sideline and just sitting in Stables that is what will move the price because that is new net kind of like flows into either as an asset buying eth on the market which again adds to volume right like there's a very style as a buyer and vice versa so that is what moves the price and similarly like the other way around when there's more eth flooding the market from these holders and people just saying Panic selling all the blobs we saw from three hours Capital Celsius stuff like that then selling even to the market that are obviously kind of like crashes the price so and and we didn't require like billions like 15 billion dollars a day to kind of like crush the price it required much less than that so and you know obviously on all the way on on the way down on the way up that's

adding to the volume like doesn't matter what price is traded out even if it's only traded for a cent profit or a cent loss it's still counted as the as the kind of like trading volume right so there's all of that that goes into it as well so given those facts you don't need much to move the price now we're going to have like 20 plus million dollars of eth uh of kind of like um of Supply just evaporate just gone it's not hitting the market anymore and there's no new eth hitting the market anymore so any if that's being bought is kind of like taking I kind of like net a loss out of the market for available eth because there's no new ethink being kind of brought to market now obviously six to five months after the merge there will be new eat

that's brought to Market uh and there will be probably people unstaking their eighth so we don't know what the price is going to do then but there is a kind of like period uh sorry an unlocked queue for unstaking eth so there can only be about 30 000 each that can be unlocked per day and it's based on validators not not the e-staked um and it's not like you know all 13 million ether staked right now can just unlock and be Market time it's not gonna happen like that anyway I bet you most people aren't even going to uh kind of like unlock their eth and and sell it I reckon people will do what I referred to before as the great reshuffling where they'll kind of like take their eighth out of somewhere else and put it into somewhere else to stake it they're still

gonna that's just not gonna have any net effect on the price of eth um so when you kind of like consider all these factors together it's just really really hard to be bearish on on it like even given the wider context given the macro context I get it right the macro environment is it could get worse from here I'm not a macro expert I don't think anyone's an expert on it I from everything that I've read from all the different kinds of people out there who monitor the macro environment um there's not really a strong consensus on anything in particular there are kind of like rough consensus on things like obviously you know you know there's a high likelihood there's going to be a recession and there's a higher likelihood the fed's going to keep raising rates for for a little while and stuff like that right but at the end of

the day like it's just speculation on what kind of like the FED will do how they are kind of economy will go and there's no way to tell how crypto will react to that either because of the fact that crypto has never experienced those kind of conditions obviously we came down a lot but I actually think like a lot of that was due to the just leverage blowing up in in crypto and that's another thing that also makes me bullish is the fact that there's no more big players left to liquidate guys if we blew them all up already like 8th went to Triple digits because of that so if we have no one left to liquidate and no big players left to liquid a no kind of like um big sellers on the horizon if everyone's already been wiped out if people are if the people that are left

right now buying either long-term accumulators which you know this is usually what this kind of like sideways range is called it's a re-accumulation range and we have this massive Supply shot coming and then on top of that the merge itself and the narrative surrounding that obviously ethereum going to prove a mistake is huge and then you have all these people searching for an asset that is going to outperform in one of the most market conditions in the last like 40 years right it all comes together in my mind now obviously I could be totally wrong here obviously I could be wrong about how strong the effects are from how bad kind of like the macro environment is but when I think about just eth in the context of just eat I don't think about anything else right I just think of in the context of eighth it's impossible

for me to be to be bearish or at least over the next few months and and potentially six or twelve months given all of the things I just I've just kind of like spoken about there and you know that's not to say that the price can't go down it's not to say the price can't go back down to the lows right like I mean I certainly can right I don't I don't know where it's going to go from here but like when I look at these things just as kind of like holistically uh I just come to that conclusion but yeah that's kind of all I want to talk about when it comes to this I think I could go on for for a long time about it but I'm gonna leave it at that on that point but yeah if you have a different

view than me you know say it in the YouTube comments or on in the Discord Channel I'd love to kind of debate this with you please challenge my assumptions here but at least try to kind of like break down my bookcase here because obviously I'm bullish biased like I'm always bullish on ethic doesn't matter if the kind of like world was on fire I would still be bullish on Eve right so I'd love to be challenged on my all my assumptions here I'd love for someone to give me a bear case for eth over maybe the next six to 12 months like and kind of give a counter case to what I just gave as as kind of like the bookcase there um but you know I don't know like everything that I've kind of like thought about I haven't been able to come up with something but as I said I

have bullish blinders on maybe I'm missing something would love to hear your thoughts there but I'm going to leave it at that because there's some other stuff I wanted to get through here uh but yeah let's set on to the next thing so uh just something really cool here from Tim baiko he visited uh this kind of like Museum that has a mainnet miner and POS test net uh kind of like running here so you can see here it's kind of like an art display or a museum display on the wall with cryptocurrency on the blockchain with us some information about nfts and then you've got him kind of like zooming in here or guess like taking closer pictures here of a kind of like proof of stake test net and in each kind of minor node here as well which is really cool so I just

thought that was cool is that the Seattle nft Museum which I didn't even know existed that Seattle had like a dedicated nft Museum which I thought was pretty funny uh but yeah it's cool to see that it's cool to see that something like this I mean some some kind of display here it actually inspired me a little bit maybe I should do something like this in my study uh obviously you can see behind me I love doing stuff in my study but uh this was really really cool uh I just wanted to kind of like highlight that uh but yeah there was a few other kind of like core development things I actually wanted to talk about as well today which is starting with this one from swag Demis so Lynn Olden uh look I'm not gonna rant on about kind of like Lynn Olden and and think kind of

like things that they can't she kind of says that's wrong about ethereum especi when it comes to proof of stake I've gone into that on um in the Discord Channel but basically she put out this tweet where she said proof of stake with the rich controlling which transactions go through and with the no requirements so large that regular people can't order the blockchain so she she is one of these people that kind of like pushed this notion that uh proof of Stack ethereum is going to have on-chain governance and that everything's going to be ruled by the rich which I just think is insane um but I don't want to debate that today uh but then she also uh kind of like shows her lack of knowledge here by thinking that the no requirements are going to get so large that people can't audit the blockchain

this to me just there's just her saying this mean like shows me she has done no Research into how ethereum is actually tackling that problem and swagner has put out kind of like tweets saying you know if you're looking at the future hypothetical state where the world economy runs on ethereum then Lynn just ignored stateless clients vertical trees data availability sampling Roll-Ups and l3s and purging historical data note that Roll-Ups data can be stored on hard drives and not on hard drives as well not just solid state drives and then I replied to Spectrum as saying you know ethereums have been talking about how to manage no requirements and state growth from basically day Zero guys like this is not something that's new to us this has been in the works for a very very long time but obviously the other things took priority getting ethereum computer

stake took priority scaling ethereum you know took takes priority over this sort of stuff but this is part of that road map The Purge The Surge The Verge all those sorts of things it's part of this is making sure that people can still audit the blockchain so that the no requirements don't get insane like something like a Solana for example where the no requirements are insane um that's why uh kind of like we focused on that within ethereum because we don't want to get to that point and then I continued by saying you know there's been a lot of research and development that has led to the things that swagner Miss mentioned but it's easier for Lynn to just post this uninformed opinion than do actual research which obviously as an educator annoys me to no end but if you don't know what these things are

that are listed here in spagnosis tweet I highly recommend just Googling each of them and learning about them because they're the next things the next big things after uh kind of like Proto dank shooting goes live that's going to be the focus and it's not going to come you know anytime soon like that I think like most of these things is a kind of like five year time Horizon sort of sort of thing but a lot of work's being done on it already a lot of research is being done are done on it and it's not like if you're if you're an ecosystem is ignoring the kind of like issue of no requirements getting to kind of like um uh what's the word I'm looking for too too expensive or to kind of like um uh what what am I looking for yeah I I I

the words kind of like Escape me but we're kind of like tackling this problem so that people can continue to validate the chain on uh a kind of a consumer PC for example and it's not just the node requirements it's also uh not just the no requirements on kind of like the CPU Ram side of things but obviously on the storage side of things like we don't want the chain getting so big that it becomes really really hard to sync it because it takes forever to sync because the Chain's so big and it also requires like this massive amount of storage in order to store everything but on that note as well storage is cheap guys like I remember like when a solid state drives used to be really really expensive like 10 years ago or something like that when they first started rolling onto the market that was super

expensive I just bought one the other day I think it was like a two terabyte uh or kind of like a I can't remember exactly how much it was but it was a two terabyte kind of like Samsung top of the range nvme SSD for a new build that I'm doing and I and I think it was like 300 and something Australian dollars uh probably maybe it was even less than that but buying that like 10 years ago I mean I don't think NVM as ssds existed 10 years ago in a consumer fashion but it would have cost you many thousands of dollars and those costs keep coming down um and obviously same for hard drives they're extremely cheap these days so those sorts of things you know obviously still cheap but the problem is when it comes to storage is making sure that everyone on the network can sync the

node because we don't want the you know full node getting to like 30 terabytes for example like it would take a long time for people to be able to sync 30 terabytes worth of the chain now there's already kind of like things in place on these ethereum four nodes such as kind of like Snap sync fast sync stuff like that but we obviously still want to be able to run archive nodes for different various reasons and we obviously want to make it so the chain doesn't Buckle either the chain doesn't become unstable so there's a lot to think about when it comes to these sorts of things and that's exactly why we have these four things that swag them as mentioned along with I think some other things out there as well that I can't think of right now but I do believe there's other things

out there as well on this front so just wanted to highlight that as I said highly recommend going and Googling each of these sorts of things learning about them because they're going to be very very important over the next few years all right so speaking of uh full nodes and running kind of like node infrastructure on ethereum there is this kind of ethereum client called akola which is a brand new implementation of Aragon um in Rust and basically what Accolade is able to do is able to synchronize an ethereum full archive node almost twice as fast as Aragon about 35 and a half hours which is a pretty insane achievement because for those of you who don't know to sync an archive node used to take a very long time I think it used to take over four weeks or something like that um and that was a while ago when the

chain was smaller um and I should also say an archive node here is not the same as a full node so a full validating node that you can run that is not as nearly as big as an archive node I believe in our code no archive node is over 10 terabytes these days but a fully validating uh full node is a few hundred gig um the main difference is that a full validating uh kind of like node will give you everything will give you the full security you know it's it's a full node it's equivalent to a full node in Bitcoin whereas an archive node what that'll give you it'll give you like the nitty-gritty details of everything that's ever happened so for example if you wanted to check the balance of your ethereum address on the 20th of July 2016. for example you won't be able to

do that with a full ethereum node but you will be able to do that with a full archive node now obviously uh the balance has changed over time that's why you wouldn't be able to do it with a full node because it just keeps the the current balance whereas an archive of node will tell you at every single point in time when uh we know what the balance was of this account what the state of this account was now obviously that's a lot of data it's a lot of information that's why these things uh that's why an archive node is over I think 10 terabytes and that's why there's been a lot of work done on Aragon side and akola's side to get the sync time down because that sort of information is relevant and useful for a lot of infrastructure providers uh and you know

it's still needed we still want to be able to run archive nodes and and keep them kind of like up and synced and everything like that so really really awesome to see this and I think it's just going to get better over time it's really crazy how much kind of like improvements are still coming to ethereum kind of like a core client infrastructure like it doesn't stop really and it gets better and better over time with different implementations uh kind of like doing doing these sorts of things as well which I think is really really cool all right finally here I put out a tweet before which I kind of like wrote a newsletter about today I said a social culture of caring about this about decentralization is arguably much more important than trying to see achieve some Nirvana of technical decentralization now this is something

that I have a really big issue with there's a lot of people on crypto Twitter who spend way too much energy and time talking about Technical decentralization and saying how their Chain's more decentralized because it has more validators or it has more nodes or it has a better Nakamoto coefficient all these sorts of stuff right when in reality if your social layer and your social culture isn't robust doesn't have a kind of a culture of decentralization isn't aligned on on the ethos of kind of like decentralization then it doesn't matter how good your technical implementation is it's not going to really mean anything because the social layer is the most important layer but even expanded on that like if your social layer is shitty if

your social layer doesn't actually value decentralization well then the technical implementation is going to reflect that why would anyone bother building a technically decentralized thing when the social layer doesn't care about it when no one's pushing for it when no one's asking for it well they're not we've seen this time and time again with other layer ones they just throw out decentralization because their social layer doesn't care about it their social layer is just speculators it's just noobs who don't care about this sorts of stuff um so that's kind of like leads to that technical uh centralization because the social layer doesn't care about that whereas in ethereum the the main reason that ethereum has not gone down that path is the socialite it is the fact that people care about decentralization and are pushing towards solutions that retain that decentralization rather than forcing us to go down a centralized path

and I think there's probably uh two very clear examples of this that I can think of off the top of my head one of them is the multi-client architecture of ethereum we didn't have to have five different execution and consensus layer clients guys like we didn't we only have to have one 1 on each side but the thing is we prioritized multi-client architecture because we believe overall it is a better way to build a network and because of that we have a decentralization and a distribution of client developers not everyone is just kind of centralized in Geth for example or in prism we have a robust set of teams that are mostly independent I think pretty much not every team is independent of each other but most of them are and they all bring UniQue Ideas they all attract different people the clients are written in different

languages attract different kind of developers like it's just amazing they attract different kind of like um of personalities right and and we kind of like have a very vibrant ecosystem of of clients people can run no one's forced to run just one client software so I think that's obviously a really really big benefit to ethereum and that is because of the social decentralization that we have but on top of that we have the layer two ecosystem the ethereum network could have easily just been like okay we'll just kind of scale everything up on layer one who cares about decentralization will you centralize everything and will basically make a super scalable chain and all be well good but we didn't go down that path we went down the path of hey let's scale via Layer Two let's go via Roll-Ups right and let's keep layer 1 as a

decentralized secure settlement layer and then at Layer Two we can have these robust set of kind of like teams Building Solutions and look at what we have today we have so many different layer two teams Building Solutions building scaling solutions for ethereum they're decentralized and distributed all over the globe pretty much all of them are independent they're all independently funded they all got their own kind of like agendas and and and and and kind of like they force competition to happen at Layer Two so again ethereum did not centralize that because it's socially I didn't allow that to happen social layer wanted decentralization so that's a very very important point that most people Miss is that technical decentralization is so overrated guys because if you don't have social decentralization you can't get to technical decentralization because you have apathy it's kind of like democracy

democracy only works if people participate in it if everyone's just apathetic if no one votes if no one cares well then a democracy is not a democracy anymore it turns but it just reverts back to dictatorship or some other form of authority authoritarianism I don't know how to say that word um but essentially the same is true for blockchains now I don't think blockchains are democracies but they function in a similar way where you being apathy being apathetic towards something just leads to worse outcomes at least that's my kind of like view on things so just wanted to kind of break that down because I see so many people on Twitter especially talking about oh ethereum only has this much or ethereum only has that many validates on it's a meme that they have this many validators or you know this has more validates in

ethereum means it's more decentralized blah blah all this sort of stuff like guys like it doesn't matter all that matters I mean not all that matters but like the number one thing that matters before technical decentralization is the social layer in my mind at least but living at that last couple of things to get through before I finish up for today a couple of project updates actually so we have Scott who is the head of nft product at unisop here announcing that they'll be launching nfts on unisop with full pseudo swap support sued so you can see the pool data flowing in here now as you guys know unisop has been making a move into nfts lately they acquired genie in order to do this uh and I think it makes sense nfts obviously at absolutely a huge Market it's going to be a very persistent Market doesn't

matter how much speculation is in and how many people hate it it's it's still going to be big I think and it's still got a lot of people interested in it it's still got lasting value here so very very cool to see uni swap continuing to kind of like support this and doing it at a rapid clip as well I wonder what Unison V4 is going to look like like is it going to have a focus on nfts are they even going to do a V4 are they going to maybe build products on top of V3 they being unisop labs for uh kind of like for example there I'm not sure exactly what those things are going to look like I'm sure V4 is being worked on um but yeah I'm very very curious to see uh you know how much kind of like nft

related stuff gets included in that uh but yeah cool to see that uh unusop here is making more moves in the nft land all right finally he had just an update out of Lyra Finance so uh Nick here from Lyra I said 3x in and Lara LPS are generating 38 annualized Market neutral returns with zero token incentives and zero trading incentives been a quite a few weeks as I've been Heavy R D mode about to get much louder over here our fundamentals have never been stronger so for those of you who don't know Lyra is an options protocol that exists on optimism I think they're exclusively on optimism I don't think they're on any other networks so just yet uh but I just I should disclose here I'm an investor in Larry here uh but yeah if you're into trading options uh you should definitely

check them out I think they have like a really a really great product and it seems that they are growing really nicely here they've been building they're one of those kind of like teams that are just building through the bear building on layer twos as well which I really really love uh and and a team that I really am glad to back because I just feel like they're I mean they're Australian based too I always love backing Aussie based teams um but they just like they're building a product I think a lot of people want it's just that options didn't really work on layer one obviously because of the lack of scale and the high fees and I think they're going to work much better on layer 2 and they're also part of the synthetics ecosystem which as you know as I mentioned has been doing very

well lately as well so I just love all I'm loving all this growth on Layer Two like even during the depths of a bear Market I mean at this point in time guys I think it's safe to say that we're in like the very depths of a bear market and I was discussing this with my with friends the other day as well that I believe that may 2021 was the actual real top I believe November 2021 was the dead cat bounce and the reason we went to a new all-time high was because we had all those institutions Levering up and you know three hours Capital living up with borrowed money Celsius leveling up all that sort of stuff they were just buying eth you know they were staking yet they were doing all this stuff with it and same with BTC and it was not a

real kind of like rally it was what's been called a low conviction rally and then we came off that so I I kind of obviously down to the 800s but I think that you know may 2021 was the kind of like real top that's my kind of like headcanon for the top so if if we do that then it's been over a year since then so we really are in the depths of kind of like the bear Market here I believe and I think that we came down very very quickly as well so that also counts for it but I just love seeing growth in a bear Market I love seeing people kind of like continue to build I love seeing people continue to build on layer twos like that's my jam these days you guys know that but yeah you should check out Lyra if you haven't yet uh um

you can kind of like check this out obviously I'll link this tweet in the YouTube description below but I think on that note that's going to be it for today so thank everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a thumbs up subscribe to the newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone [Music]